§ 1181.65. Cost-finding.
(a) A nursing facility shall use the direct allocation method of cost-finding. The costs of ancillary and administrative services shall be apportioned directly to the appropriate level of care based on appropriate statistical data.
(b) A facility’s direct or indirect allowable costs related to patient care will be considered in the finding and allocation of costs to the MA Program for its eligible recipients. Total allowable costs of a facility shall be apportioned between third-party payors and other patients so that the share borne by MA is based upon actual services and costs related to MA patients. For purposes of MA reimbursement, the return on net equity and net worth is not reimbursable.
(c) The Department will recognize depreciation and interest as an allowable cost for general and county nursing facilities subject to the following conditions:
(1) Depreciation and interest on new or additional beds is an allowable cost only if one of the following applies:
(i) The facility was issued either a Section 1122 approval or letter of nonreviewability under 28 Pa. Code Chapter 301 (relating to limitation on Federal participation for capital expenditures) or a Certificate of Need or letter of nonreviewability under 28 Pa. Code Chapter 401 (relating to Certificate of Need Program) for the project by the Department of Health no later than August 31, 1982.
(ii) The facility was issued a Certificate of Need or letter of nonreviewability under 28 Pa. Code Chapter 401 for the construction of a nursing facility, and there was no nursing facility, including county, private or hospital-based, located within the county.
(2) The Department will not recognize depreciation and interest as allowable costs if the facility does not substantially implement the project as defined at 28 Pa. Code § 401.5(m)(3) (relating to Certificate of Need) within the effective period of the original Section 1122 approval or the original Certificate of Need.
(3) Depreciation and interest on replacement beds is an allowable cost only if the facility was issued a Certificate of Need or a letter of nonreviewability by the Department of Health.
(4) Allowable depreciation and interest on capital indebtedness will be recognized on debt service incurred to finance a maximum cost per bed of $22,000. The $22,000 per bed limit does not include the cost of movable equipment. Allowable depreciation and interest will be calculated by the straight line method of accounting.
(d) Allowable operating costs for a general nursing facility including hospital-based and special rehabilitation facilities, shall be determined subject to the following:
(1) The Department’s Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care Facilities.
(2) The HIM-15, except that if the Department’s Manual and the HIM-15 differ, the Department’s Manual applies.
(3) The MSA or non-MSA group ceilings if applicable.
(e) Allowable operating costs for a county nursing facility will be determined under the following:
(1) The Department’s Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care Facilities is used for cost-finding.
(2) HIM-15 will used as a supplement to the Department’s Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care Facilities with respect to allowable costs. HIM-15 may not be construed to recognize an allowable cost which otherwise is not included or is excluded in the Department’s Manual for Allowable Cost Reimbursement for Skilled Nursing and Intermediate Care Facilities.
(3) The facility’s net operating per diem is subject to the MSA or non-MSA group ceiling for county facilities.
(4) The Department will deduct from the State share of the allowable operating costs of county facilities the administrative expense the Department incurs in determining the allowable operating costs of a county facility.
(f) Allowable costs for an intermediate care facility for the mentally retarded shall be determined as follows:
(1) For State-operated intermediate care facilities for the mentally retarded, allowable costs are determined by HIM-15.
(2) For non-State-operated intermediate care facilities for the mentally retarded, allowable costs are determined by Subchapter C (Reserved).
(g) The allowable costs of a psychiatric transitional facility and other State-operated nursing facility other than an intermediate care facility for the mentally retarded will be determined in accordance with the HIM-15 and within the limits of their approved budgets.
(h) For a nursing facility, the Department’s reimbursement for depreciation, interest and other costs related to the negotiation or settlement of the sale or purchase of a capital asset that undergoes a transfer of ownership either on or after July 18, 1984, will be determined under paragraphs (1) and (2). Paragraph (1) does not apply to an asset that undergoes a transfer of ownership either on or after July 18, 1984 under an enforceable agreement that was entered into prior to July 18, 1984.
(1) The cost basis that will be used to establish the allowable depreciation and interest for an asset that undergoes a transfer of ownership on or after July 18, 1984 will be the lesser of the remaining allowable cost basis of the asset to the owner of record on or after July 18, 1984, or, in the case of an asset not in existence as of that date, the first owner of record of the asset after that date, or the allowable cost basis of the asset to the new owner.
(2) The Department will not recognize as allowable, a cost including legal fees, travel costs and the costs of feasibility studies, attributable to the negotiation or settlement of the sale or purchase of a capital asset—by acquisition or merger—for which a payment has previously been made under Title XVIII of the Social Security Act (42 U.S.C.A. § § 1395—1395xx).
Authority The provisions of this § 1181.65 amended under sections 201 and 443.1 of the Public Welfare Code (62 P. S. § § 201 and 443.1).
Source The provisions of this § 1181.65 codified July 24, 1981, effective July 25, 1981, 11 Pa.B. 2610; amended July 2, 1982, effective July 1, 1982, 12 Pa.B. 2070; amended August 5, 1983, effective July 1, 1983, 13 Pa.B. 2402; corrected August 19, 1983, effective February 12, 1983, 13 Pa.B. 2553; amended February 17, 1984, effective July 1, 1983, 14 Pa.B. 546; corrected August 24, 1984, effective March 24, 1984, 14 Pa.B. 3091; amended May 3, 1985, effective retroactively to July 1984, 15 Pa.B. 1629; amended September 6, 1985, effective September 7, 1985, except that the groups and ceilings shall be effective and apply at audit to costs of services rendered from July 1, 1984 through December 31, 1985, 15 Pa.B. 3181; corrected January 24, 1986, effective September 7, 1985, 16 Pa.B. 249; amended February 28, 1986, effective March 1, 1986, 16 Pa.B. 600; amended March 10, 1989, effective immediately and applies retroactively to February 23, 1988, 19 Pa.B. 999; amended March 10, 1989, effective immediately and applies retroactively to January 1, 1989, 19 Pa.B. 1005. Immediately preceding text appears at serial pages (117428) to (117430).
Notes of Decisions Conflicting Authorities
When a conflict as to allowable operating costs arose between the state and federal manual, the State manual controlled. Western Reserve Convalescent Home v. Department of Public Welfare, 660 A.2d 1312 (Pa. 1995).
Federal manual establishing offset rules applies where State manual is silent. Northwood Nursing and Convalescent Home v. Department of Public Welfare, 567 A.2d 1385 (Pa. 1989).
Cross References This section cited in 55 Pa. Code § 1181.52 (relating to payment conditions); and 55 Pa. Code § 1181.259 (relating to depreciation allowance).
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